14 Jul 2010

Shifting Alliances

All Posts 9 Comments

A somewhat angry post that makes some good points. I liked this one in particular:

Looking back, one has to wonder how economists ever came to the consensus that making ultra-underpriced loans to clumsy, inflexible banks could ever possibly be a good idea. My suspicion is that it is a kind of Goodhart phenomenon: at the time these economic models were created, the metrics economists cared about did serve as good proxies for general economic health. But as they were targeted by policy, they lost their value as indicators.

If I may elaborate: In a free-market economy, there is a certain logic in adding up how much people spend on “stuff” and calling that “total output.” But in a manipulated economy, if politicians take $1 trillion from people under threat of imprisonment, then spend it on tanks, bombers, and paying people to burn marijuana plants, it’s not clear that this also contributes “$1 trillion” to the economy.

* * *

Isn’t life strange? If you had told me a year ago that I would be happily quoting from Silas Barta’s critique of Scott Sumner on macroeconomics, while at the same time fending off Gene Callahan’s comparison of me to the Nazis, well, I don’t know what I would have done. I imagine it would have involved a chortle for sure, though. Perhaps even a guffaw.

9 Responses to “Shifting Alliances”

  1. S.M. Oliva says:

    Wait, you’re a Nazi, Bob? Damn. And you look like such a nice guy too…

    • bobmurphy says:

      Gene will be exasperated if I don’t point out that Gene did NOT say I WAS a Nazi, or even that I was as BAD as a Nazi. But he did compare me to them for rhetorical effect, i.e. to demonstrate how bad my argument was.

  2. S.M. Oliva says:

    You’d think a self-proclaimed lofty intellectual like Callahan would come up with a more original comparison.

  3. Roger Ritthaler says:

    “it’s not clear that this also contributes ‘$1 trillion’ to the economy.”

    What are you smoking? It doesn’t contribute anything.

  4. Silas Barta says:

    Thanks for the mention! I’m already hard at work squeezing more reductios out of Sumner 🙂

  5. david says:

    Yes, the emergence of a “big government” wing of the libertarian movement is rather mysterious. I guess it’s possible to be too nuanced, clever and deep.

    In any case, on the global warming front, there is plenty of cause for scepticism. See, for example:


    The author of that article, Lawrence Solomon, has written many excellent articles on the science of global warming and, in particular, the science and analysis of those scientists who are skeptics. The Financial Post generally has been very good at covering the substantce of the other side of the debate.

    I would make four other points:

    a) were the townsfolk engaging in ideologically blinkered thinking when they were skeptical of the boy who cried wolf or empirically justified thinking?

    b) if it is wrong to be skeptical of anthropogenic global warming simply because of its all-too-convenient implications for big government, why is OK for economists to ask, in other contexts, “cui bono”?

    c) I have been really struck over the last couple of years while reading economics blogs by the number of otherwise libertarian, small-government or other pro-free-market bloggers who are very concerned that they might be perceived as anything other than unquestioning believers when it comes to global warming dogma. The fear is palpable.

    • bobmurphy says:

      In his defense, Gene isn’t a libertarian anymore. (BTW I got your note about Japan, and tried to thank you, but the email bounced back.)

      • david says:

        Thanks for the heads-up. Was it sent to the same email address as I use here? I have had that happen before, not sure why.

  6. david says:

    Oops, forgot the fourth point.

    4) Sometimes, I think that some in the libertarian/ free-market camp assume that the other side plays by Marquess of Queensbury rules. Usually, they don’t.